Research & Development Tax Credit

Research Expense Credits

A taxpayer may be eligible for a credit on qualified research expenses. The potential value of the credit is equal to the taxpayer’s qualified research expense for the taxable year, minus the base period amount up to $1 million, multiplied by 15 percent. A credit percentage of up to 10 percent is applied to any excess of qualified research expense over a base period amount greater than $1 million. Additionally, for Indiana qualified research expenses incurred after December 31, 2009, an alternative method of calculating the credit is available.

At the taxpayer’s election, the amount of the taxpayer’s research expense tax credit is equal to ten percent of the part of the taxpayer’s Indiana qualified research expense for the taxable year that exceeds fifty percent of the taxpayer’s average Indiana qualified research expense for the three taxable years preceding the taxable year for which the credit is being determined. However, if the taxpayer did not have Indiana qualified research expenses in any one of the three taxable years preceding the taxable year for which the credit is being determined, the amount of the research expense tax credit is equal to five percent of the taxpayer’s Indiana qualified research expense for the taxable year. Credits awarded pursuant to the relevant statutory provisions may be carried forward for up to ten taxable years. For more details on the calculation of the credit, please refer to IC 6-3.1-4.

Qualifying Criteria

An Indiana qualified research expense is defined as the sum of the following amounts, incurred by the taxpayer during the taxable year: wages paid to employees, supplies, services for qualified research or supervision of research activities. Qualified research expense is defined by Section 41(b) of the Internal Revenue Code as in effect on January 1, 2001. In prescribing what qualifies as a research expense, the Department of Revenue may consider the following:

The place where the services are performed

The residence or business location of the person or persons performing the services